Labor Tensions Threaten Airline Recovery

Increasingly turbulent labor negotiations are threatening to knock U.S. airlines off their recovery course just as the battered industry starts to emerge from a deep recession.

Airlines slashed pay and benefits over the past decade, often during stays in bankruptcy court. Now, their restive workers are pressing for wage increases, in some cases by double-digit percentages.

Illustrating the growing divide between labor and management, the largest union at
AMR Corp.'s
AMR -7.29%
American Airlines asked federal mediators Thursday to release it from mediated talks with the airline. That could open the door to the first strike at a major U.S. carrier since 2005.

American, whose jets are shown above at Miami International Airport last fall, is at the forefront of labor tensions.
Associated Press

Both sides agree that never before have so many of the nation's airlines been in labor talks simultaneously. More than two-thirds of the industry's contracts are estimated to be up for renewal. Fifty-two employee groups spanning most major carriers already have taken their grievances to the National Mediation Board, which oversees labor relations at airlines.

"It's a feeding frenzy,'' said Robert Mann, an airline consultant at R.W. Mann & Co. Bonuses paid out to executives in recent years have exacerbated labor-management tensions, he added.

Labor's demands represent a major wild card for the industry, which is already wrestling with rising fuel costs. Airlines could lose money in 2010 for a third straight year, even as more travelers return to the skies and ticket prices rebound after a plunge in traffic during the economic downturn.

The wage talks also pose a test for the Obama administration and its appointees on the labor front. Because of the importance of air travel to commerce, airline workers aren't allowed to strike unless the NMB releases them from mediation. Even then, a White House emergency board can order them back to negotiations.

In Europe, airlines also face the threat of worker unrest as they try to boost productivity and hold the line on pay. Talks between
British Airways
PLC and flight attendants broke down Wednesday, and cabin crews have until Monday to notify the airline of strike plans. Last month, a German court ordered
Deutsche Lufthansa AG's
DLAKY 2.74%
pilots back to the negotiating table after a brief strike.

In the U.S., American, based in Fort Worth, Texas, is facing the most intense labor tensions. Workers at the country's No. 2 airline by traffic agreed to $1.8 billion in concessions in 2003 to keep the carrier out of bankruptcy. Now, union negotiators are trying to claw back a big chunk of those concessions, which cut workers' compensation by 25% or more.

On Thursday, the Transport Workers Union of America asked the NMB to release from mediation 28,000 mechanics and other ground workers at American and its regional carrier. If the NMB were to agree to the request, it would trigger a 30-day countdown to a possible strike.

The Association of Professional Flight Attendants, which represents nearly 18,000 workers at American, said it also plans to ask for a release when it meets with the NMB next week. "It's going to come to a head at some point, and this is the time,'' said Laura Glading, the union's president, who also is readying a strike vote. "It's been long enough.''

Unions hope the NMB and the Obama White House will give them a more favorable hearing than they got from the Bush administration, which permitted two strikes by passenger airlines in eight years. Two of the NMB's three current board members are former labor leaders after Linda Puchala, a former flight-attendant union leader, last year replaced Read Van de Water, a former airline lobbyist.

Heightening speculation about a political shift, the NMB board recently proposed making it easier for airline workers to join unions. Under the proposal, worker groups would be able to unionize if 50% of the ballots cast were in favor of the move. Under a decades-old rule, airline workers who don't vote in unionization elections are counted as "no"' votes.

The NMB declined to make its board members available to discuss the labor talks and their possible outcome. A White House spokesman didn't respond to requests for comment.

U.S. airlines say they can't meet rising wage demands as they struggle back to health after losing money in seven of the past 10 years. The International Air Transport Association estimates North American carriers will lose $1.8 billion in 2010 after posting $27.4 billion in combined losses in the previous two years.

"This is a fragile industry,'' said Jeffrey Brundage, American's head of employee relations. He urged workers, including American pilots, who have asked for a 50% raise and sounded strike warnings, to stay at the negotiating table.

Even if airline unions don't get the go-ahead to strike, they can exert pressure in other ways.
Continental Airlines Inc.,
CAL 0.14%
the fourth-largest U.S. airline, won approval last year for a trans-Atlantic joint venture with
UAL Corp.'s
United Airlines,
Air Canada
and Lufthansa. But Continental's current agreement with its pilots, which is up for renegotiation, doesn't allow the airline to share revenue with a domestic carrier such as United.

Jay Pierce, who heads the union representing 4,300 Continental pilots, is pushing for $500 million a year in improved wages, benefits and work rules. If the talks don't go well, he has warned that pilots won't allow the joint venture to go forward.

United, the nation's No. 3 airline, used its stay in bankruptcy court to win big pay concessions from workers. Now, United's 6,500 pilots are pressing in mediated talks for an "industry-leading contract," Wendy Morse, the new head of the pilots union, said recently.

A flashpoint at United is its planned joint venture with
Aer Lingus Group
PLC of Ireland to operate flights between Washington and Madrid with lower-paid Aer Lingus crews. United pilots and flight attendants have filed grievances, saying the venture violates their existing labor contracts, and they hope to "shut it down,'' said Ms. Morse.

Doug McKeen, United's senior vice president of labor relations, said Thursday that the carrier's alliances have created and preserved 3,000 jobs. Customer-service and baggage-handling work in Washington to support the Aer Lingus flights will be performed by United workers, he said, and the new service will provide a route United couldn't profitably serve on its own.

Airline Pilots Association International, the umbrella pilots union, applauded House legislation introduced this week that directs the Department of Transportation to ensure that U.S. airline workers as well as their employers benefit from new revenue-sharing agreements with foreign carriers.